The multinational companies, who are reaping high from the Indian pharmaceutical market, continue to spend meagre amounts in research and development in the country, compared to the domestic pharma majors, according to the latest available data.
If the information collected by the Chemicals Ministry is any indication, most of the MNCs spent below 0.5 per cent of their sales turnovers for research, notwithstanding their impressive presence and high margins in sales. At the same time, some of the leading domestic companies spent over 10 per cent of turnover in the R&D. And now the major domestic companies are hiving off their R&D wings to focus more on research.
Multinational companies like Abbott India Ltd., Astra Zeneca Pharma India Ltd., Bayer Pharmaceuticals Pvt. Ltd., Eli Lilly & Company (India) Pvt. Ltd., Fulford India Ltd., Glaxo Smith Kline Pharmaceuticals Ltd., Johnson & Johnson Ltd., Merck Ltd., Novartis India Ltd., Organon (India) Ltd., Pfizer Ltd., Roche Scientfic Co. (India) Pvt. Ltd. Sanofi Aventis Group, Wyeth Ltd., GSK Pharmaceuticals Ltd.(Glaxo), Sandoz Pvt. Ltd., Uni-Sankyo Ltd., Quintiles Research (India) Pvt. Ltd. & Regent Drugs Ltd. and many others are selling their products in the Indian market.
As per the information furnished by Department of Scientific and Industrial Research, the expenditure incurred on research in the field of pharmaceuticals by the multinational companies remained far from the desired.
Abbott India Ltd has spend only Rs 2.08 crore, which is just 0.41 per cent of their turnover of Rs 510.24 crore turnover during the period of December 2005 and November 2006, according to the data submitted to the Government. Merck Ltd also spent just 0.47 per cent of the turnover on
R&D from January to December, 2006. Sandoz Pvt Ltd however spent better at 19.54 per cent on R&D during the period of April 2006 and March 2007. Their total sales stood at Rs 530.32 crore, while the R&D expenditure stood at Rs 103.63 crore.
GSK Pharmaceuticals invested Rs 6.15 crore during the year of 2006 on resarch, which was just 0.37 per cent of their total turnover of Rs 1677 crore. Pfizer performed better by sparing 3.60 per cent of its turnover of Rs 662 crore on R&D. During the fiscal year of 2006-07, Quintiles Research India however spent most of their turnover in the research. About Rs 45.69 crore of the total earnings of Rs 49.58 crore was spent on research. Uni-Sankyo Ltd set apart 0.42 per cent of their Rs 49.59 crore turnover during the fiscal year of 2006-07, while Regent Drugs Ltd earmarked 7.38 per cent of their Rs 129.09 crore during the same period.
On the other hand, domestic companies are getting more interested in research. Ranbaxy Board has approved an in-principle de-merger as a step in `creating an independent pathway for DDR with dedicated resources and enhanced focus for long-term value building.' The Gurgaon-based Indian major plans to list the new company by next year. However, the novel drug delivery system (NDDS) business that accounts for 9 percent of its total sales will remain with the parent company.
Ranbaxy has state-of-the-art research infrastructure and skilled scientific talent pool. It spends between $20m and $25m on the NDDR program every year. The new independent vehicle is expected to align assets with priorities to accelerate the drug discovery programs with more operational freedom and flexibility. Ranbaxy has so far filed 222 ANDAs with US FDA and received 139 approvals. Last financial year, the Ranbaxy spent its Rs 17.90 per cent of the total Rs 3569.77 crore of sales was spent for research during 2005-06. But it came down to 12.16 per cent next year. Out of the total Rs 3977.77 crore of sales, Rs 639.33 crore was spent on R&D during 2005-06 but it was only Rs 483.82 crore in the following fiscal.
Many of the Indian pharma majors like Sun Pharmaceuticals and Nicholas Piramal have already hived off their R&D divisions into separate entities, setting a new trend in the recent past. Dr Reddy's has floated Perlecan Pharma Pvt Ltd in collaboration with ICICI Venture to take care of novel drug business. Increasing the pricing pressure, stiffening competition, and the rising rupee (around 15 percent in last one year) on the backdrop of the US slowdown (the obvious market for pharmaceutical exporters) have reportedly prompted the companies to de-merger the R&D wings. While the cost of developing a new drug ranges between $800 million and $1 billion, the gestation period ranges to 12-15 years.
Dr Reddy's spent 7.56 per cent during 2006-07 and 11.89 per cent of their sales during 2005-06 on research. They spent Rs 292.80 crore in 2006-07 and Rs 253.94 crore during 2005-06 on R&D. Cipla spent Rs 175.73 crore (5.11 per cent of total turnover) in 2006-07 and Rs 155.4 crore (5.37 per cent of sales) in 2005-06 for the purpose. Lupin also spent around 7 per cent of their sales during the two years while Aurobindo Pharma set apart 5.14 per cent and 4.64 per cent respectively in 2006-07 and 2005-06 on research.
Sun Pharma spent Rs 153.63 crore (9.24 per cent) during 2006-07 and Rs 113.44 crore (8.78 pr cent of sales) in 2005-06 for the purpose of research. Nicholas Piramal also spent around 6.70 and 6.50 per cent of their sales during the last two years respectively. Other Indian companies like Wockhardt, Orchid Chemicals, Ipca Laboratoreis, Torrent Pharma, Matrix Labs, Glenmark, Biocon, Alembic, Unichem Labs and Dabur Pharma also spent around 5 per cent of their total sales for research.
But interestingly, going by the patent applications in India, the multinationals led the tally. According to a World Bank report, out of the top 50 applicants from the country, 44 were foreign firms in all categories including the pharmaceutical sector.
The Council of Scientific and Industrial Research and the defence ministry were the two Indian public agencies with the highest number of patents in India, followed by the Steel Authority of India. The two private companies in the top 50 patent applicants are Ranbaxy and Dr Reddy's Laboratories.
Though most of the multinational pharma giants have no R&D centres in the country, they continued to spend largely in their innovation projects elsewhere. And our domestic companies remained still country cousins in R&D spending. The top 10 Indian firms, put together, invested 477 million euro last year for R&D, less than one-tenth of the world's biggest R&D investor Pfizer. The total R&D spending by top 10 Indian companies is also less than what the lowest ranked company among the world's top-50 spends, according the findings based on the European Commission's latest annual R&D Scoreboard 2007, which has listed top 50 R&D investor across the world, top-1,000 companies in the EU as well as top-1,000 companies in the rest of the world. The total R&D investment by the 10 Indian firms stood at a meagre 477 million euros (Rs 2,700 crore), which is less than one-tenth of the investment made by Pfizer or DaimlerChrysler.